Pressemitteilung BoxID: 679545 (BMO Global Asset Management)
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Comment by Michiel de Bruin, Head of Global Rates and Money Markets at BMO Global Asset Management, on the ECB's decision to cut monthly bond purchases in half

(lifePR) (London, ) “After the US Federal Reserve Bank and the Bank of Canada, the European Central Bank (ECB) is now the third major central bank to announce it will scale back monetary stimulus, with the Bank of England expected to follow next week.”

“The ECB governing council extended its monthly bond purchase programme, commonly known as quantitative easing (QE), by nine months to September 2018, but reduced the monthly purchase amount from €60 billion to €30 billion with effect from January 2018. The scope and size of the extension was in line with market expectations. Initial reaction from the market was a weaker euro and a small relief rally in European bonds. In addition, the ECB made clear that it would refrain from raising interest rates as long as the QE programme runs. So, in fact, by adding another nine months to its buying programme, the ECB will not hike rates before late 2018 at the earliest, thereby aiming to reassure the market that it will reduce its stimulus only gradually. However, with this policy change, the ECB has indicated it will now aim to end its QE programme in late 2018 and may start hiking interest rates soon after. This is not a small step.”

“The reduction in the purchase amount would have been supported by the hawks in the governing council, central bank governors from the core countries such as Germany and the Netherlands. They would have pointed out that the euro economy is growing fast and, more importantly, the growth is self-sustaining. Euro area inflation is also showing some signs of revival. Monetary conditions in the euro area are still extremely loose, which has led to peripheral countries such as Italy, Spain and even Portugal now showing solid growth and, more importantly, financial markets in these countries have stabilised. Although some risks still exist, for example in Catalonia and the Italian elections, the political environment in Europe has stabilised to a large extend, driven by relative euro area friendly election outcomes in the Netherlands and France earlier this year. In this more stable environment, the hawks believe that the current ECB policy is extremely loose - too loose - and policy accommodation should be scaled back soon. On the other hand, the doves in the council would have pointed out that whilst growth is picking up, inflation is still lagging and therefore more needs to be done to get inflation expectations anchored around the ECB target of “below but close to 2%”. Their fear is that any abrupt withdrawal from monetary stimulus would endanger this process. There is a worry that, by reducing stimulus, the euro, which is already up by around 12% versus the US dollar this year, will rise further, adversely impacting growth and inflation. So it seems that with the announced measures, the ECB has provided some reassurances for both hawks, by scaling back purchases, and doves, by extending the programme by nine months.”

“The ECB has now set its policy course and the market’s attention has switched to the US, where strong data suggest that the US Federal Reserve is likely to raise interest rates faster than the market expects. The euro’s weakness may have further to go.”

“In conclusion, one could say that the ECB is yet another central bank changing its bias to reducing monetary stimulus. Although the ECB currently remains a powerful force in the market, its footprint, albeit slowly, will fade in the coming years. For now, this would also imply that there will still be support for the bond markets of the weaker European countries, such as Italy and Spain. However, in general, the impact on European bond markets is likely to be adverse, and within this environment we believe bond yields can go higher. This would also be reflective of the strong euro economy and the current favourable global economic developments in general. But the euro may weaken further against the US dollar.”

BMO Global Asset Management

BMO Global Asset Management ist ein globaler Investmentmanager, der aus seinen vier Investmentzentren in London, Toronto, Chicago und Hong Kong sowie mit mehr als 25 Niederlassungen in 14 Ländern einen herausragenden Service bietet. Das verwaltete Vermögen beläuft sich per 31. Juli 2016 auf mehr als 238 Milliarden US-Dollar.

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BMO Global Asset Management ist Teil der BMO Financial Group (NYSE: BMO), einer breit diversifizierten Finanzdienstleistungsorganisation, die im Jahre 1817 unter dem Namen Bank of Montreal gegründet wurde. Die BMO Financial Group ist mit einer Bilanzsumme von 719 Milliarden Kanadische Dollar per 30. April 2017 und über 45.000 Mitarbeitern eine der größten Banken Nordamerikas. BMO Wealth Management verwaltet weltweit ein Anlagevermögen von 430 Milliarden Kanadische Dollar per 30. April 2017.